Unemployment tax rates for employers vary from state to state.
Your unemployment tax bill may be influenced by the number of former employees
who’ve filed unemployment claims with the state, your current number of
employees and your business’s age. Typically, the more claims made against a
business, the higher the unemployment tax bill.

Here are six ways to control your unemployment tax costs:

1. Buy down your unemployment tax rate if
your state permits it. Some states allow employers to annually buy
down their rate. If you’re eligible, this could save you substantial dollars in
unemployment taxes.

2. Hire new staff conservatively. Remember,
your unemployment payments are based partly on the number of employees who file
unemployment claims. You don’t want to hire employees to fill a need now, only
to have to lay them off if business slows. A temporary staffing agency can help
you meet short-term needs without permanently adding staff, so you can avoid
layoffs. This is also a good way to try out a candidate.

3. Assess candidates before hiring them. Often
it’s worth a small financial investment to have job candidates undergo
prehiring assessments to see if they’re the right match for your business and
the position available. Hiring carefully will increase the likelihood that new
employees will work out.

4. Train for success. Many
unemployment insurance claimants are awarded benefits despite employer
assertions that the employee failed to perform adequately. Often this is
because the hearing officer concluded the employer hadn’t provided the employee
with enough training to succeed in the position.

5. Handle terminations thoughtfully. If you
must terminate an employee, consider giving him or her severance as well as
offering outplacement benefits. Severance pay may reduce or delay the start of
unemployment insurance benefits. Effective outplacement services may hasten the
end of unemployment insurance benefits, because the claimant has found a new
job.

6. Leverage an acquisition. If
you’ve recently acquired another company, it may have a lower established tax
rate that you can use instead of the tax rate that’s been set for your existing
business. You also may be able to request the transfer of the previous
company’s unemployment reserve fund balance.

If you have questions about unemployment taxes and how you can
reduce them, contact Scott Taylor, CPA.